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April 19, 2012

Thai Pension Fund to Invest in U.S., European Properties

Sees opportunity in ‘stagnant economic environment’

Thailand’s Government Pension Fund plans to leave behind the low yields of its own domestic bonds in favor of investing funds in U.S. and European properties, saying that it believes the “stagnant economic environment” in Europe and the U.S. present opportunities to increase returns.

Bloomberg reported Thursday that the fund, which manages approximately $17.5 billion in assets and is the third largest money manager in the country, plans to buy properties this year totaling about $250 million, according to Sopawadee Lertmanaschai, the agency’s secretary general. She added that the agency is currently choosing companies to advise it on these investments.

It has also hired Pacific Investment Management Co., MFS Investment Management and seven other companies to manage its investments totaling $1.5 billion in global bonds and equities.

“The stagnant economic environment in the U.S. and Europe offers a great opportunity for property investments because of attractive prices,” Sopawadee said in the report. “Global property investment is our strategy to become more aggressive and dynamic in boosting returns for our pensioners.”

Presently the agency holds no foreign properties as investments in its portfolio, she said, and the planned purchases will amount to approximately 1% of its total assets. It has also cut domestic bond holdings from 69% in 2011 to 65% in 2012.

The fund, which manages the retirement savings of approximately 1.2 million state employees, also plans to invest more in emerging-markets bonds in the hope of bringing in better returns than the bonds of developed countries. Sopawadee said it is aiming for a return 1.5% higher than the country’s domestic inflation rate, which according to the finance ministry had reached a three-month high of 3.45% on April 3.

It has also for the first time invested in Malaysian and South Korean bonds. About 10% of its assets are held in global debt securities. Sopawadee said, “Over the next few years, we will increase our investments abroad to diversify the risk. Commodities, properties and infrastructure investment will give a stable return in line with inflation rate.”